June 5, 2020
WTO Dispute Settlement Reform Efforts Should Move Forward Now
By Bruce Hirsh, Principal, Tailwind Global Strategies
Member governments of the World Trade Organization should take steps now to help restore the WTO’s core dispute settlement function, both to help Members resolve disputes without trade wars and to reinvigorate the organization so that it can help manage the trade fallout from the coronavirus crisis.
The dispute settlement system has been crippled since last December by the U.S. insistence that reforms must precede appointments to the WTO Appellate Body. But WTO members need not await the end of the coronavirus crisis – or specific proposals from the United States -- to make progress towards restoring the system. Should there be agreement on the goal of making the Appellate Body operate as intended in 1995, members can advance solutions now.
The coronavirus crisis has dramatically exposed the fragility of the international economic order. Nationalist responses to the crisis such as export restraints have accelerated and become more widespread, reflecting political pressures, failures of leadership, and a loss of faith in the effectiveness of international mechanisms and rules.
At the same time, the crisis has underscored the critical importance of stability to the global economy and the contributions these institutions make in maintaining that stability. For the moment, cooperative efforts have been focused on arresting the slide towards unrestrained market closing. At some point, however, these efforts are likely to shift towards attempts to reinvigorate these institutions and to reassert the rules and norms they were created to develop and enforce.
Nowhere will this involve a greater challenge than at the World Trade Organization, whose rules and norms were already under strain from unilateralism, innovation mercantilism and a leadership vacuum. WTO Members will now face the challenge of sorting out the consequences of various forms of state involvement in the global economy that the coronavirus crisis has engendered. Managing the ongoing effects of these actions, reasserting rules and norms, and modifying rules to accommodate those actions deemed in retrospect to have been necessary, while reining in those judged otherwise, will prove a herculean task.
Viewed from this perspective, resolving the deadlock over the WTO Appellate Body no longer appears as challenging as was the case only few short weeks ago. In truth, it has never been as intractable as it seemed. One side identified as its objective making the system operate as Members intended in 1995, and the other appeared to accept this objective, the gap relating only to the two sides questioning the sincerity of the other. This trust gap has had a predictable impact on the negotiating dynamic in Geneva, where one would never negotiate with oneself, and where there will never be a shortage of validators for hanging tough and standing pat.
This situation represents a wasted opportunity, both to restore to full functionality a central element of the multilateral trading system, but also to restore confidence in the WTO’s ability to serve as a forum for addressing the trade concerns that have risen to such prominence during the coronavirus crisis. If there is agreement on making the dispute settlement system operate as Members intended in 1995, the details of how to get there are largely technical.
While the United States has not offered concrete reform proposals, it has laid out
its concerns in detail. Importantly, other WTO members share many of these concerns, and many have offered proposals for guardrails to prevent future problems, some of which have been captured in a
draft proposal from the chair of WTO’s General Council, New Zealand Ambassador David Walker. It is in every Member’s interest, and not simply that of the United States, that work be pursued and completed as soon as possible.
With respect to the reforms themselves, last December, in a
previous paper I authored , which was released by NFTC, I addressed possible approaches to addressing a central element of the U.S. concerns, the issue of Appellate Body overreach. The paper suggested making the Appellate Body’s deadline for completing its work jurisdictional, prohibiting advisory opinions, and clarifying various dispute settlement rules to make clear that the system’s purpose is to resolve disputes rather than to make law.
In the new analysis released this week, I address other elements of a likely reform package. Such a package should:
- Provide clear guidance that Appellate Body reports do not constitute binding precedent, but may, as with panel reports, be cited for their persuasive value;
- Replace the Appellate Body secretariat with clerks seconded from the WTO secretariat;
- Provide guidance on the role of adjudicators and of the Appellate Body that emphasizes their role of assisting WTO Members in resolving disputes rather than making law.
Building on these and other proposals from WTO members and outside commentators, members can and should make progress now on reforms that can both restore the dispute settlement system, ensure ongoing, sustainable support for its operation and demonstrate that members can effectively take the initiative to address pressing trade concerns.
